A Simple Guide: Opening a Demat Account for Minors 🧑‍ in Bharat
Planning for your child’s future is essential. Parents need a dedicated fund to secure their child’s future, from rising education costs to unforeseen expenses. One effective way to achieve this is by opening a Demat account for minors. Not only does it help you safeguard funds for your child’s education and other life events, but it imparts essential financial literacy from an early age.
The Procedure for Initiating a Demat Account for Minors:
- Minor’s PAN Card: Ensure the minor has a Permanent Account Number (PAN) card, which is mandatory for the application. The minor’s PAN and Aadhar card should be linked before registering for a Demat account.
- Additional Documents: You must also submit the minor’s permanent address and identity proof alongside the PAN card. When registering a Demat account in the minor’s name, two Know Your Customer (KYC) documents are required. One collects basic information about the child, while the other gathers the guardian’s personal details, bank account information, and annual income details.
- Reason for Opening the Account: Provide a written explanation for opening the Demat account in the minor’s name. Many institutions consider an email from the guardian to be valid written proof.
Important Restrictions:
Opening a Demat account for a minor comes with certain restrictions:
- Equity Trading Only: The minor’s guardian cannot engage in intraday trading using the minor’s account due to the high volatility of this market. A minor’s Demat account also prohibits financial derivatives like futures and options; only equity trading is permitted.
- No Separate Trading Account: Trading accounts cannot be opened in the minor’s name; brokerage firms generally combine trading and Demat accounts.
- No Joint Accounts: Minors cannot be joint holders of a Demat account, as the registration process and regulations differ for minors and adults.
Sum Up!
A Demat account for your child can be a dedicated fund for their future educational needs and other expenses. It also cultivates financial literacy from a young age, giving your child a valuable advantage. In a country with limited financial literacy, a child with an early introduction to online Demat accounts gains a significant financial edge. Invest in your child’s financial future by opening a Demat account today and watch their financial awareness grow alongside their savings.
👉 Can I open a Demat account for a minor?
Yes, a Demat account can be established in the minor’s name, with the guardian overseeing it until the minor reaches adulthood. The guardian must be either the father or, in his absence, the mother. If both are unavailable, a guardian can be appointed through the court.
👉 Can a minor be a joint holder in another Demat account?
No, a minor is not eligible to be a joint holder in a Demat account.
👉 Can a trading account be initiated in the name of a minor?
Yes, a trading account can be opened in the minor’s name, but solely to sell securities held by the child. These securities may have been acquired through IPO investment, inheritance, corporate actions, or off-market transfers, including gifts or transfers between family members or as required by government or regulatory directives. However, this account will be managed by the natural guardian until the minor reaches adulthood.
👉 Can a minor buy and sell securities in their trading account?
No, a minor cannot contract with a stockbroker to buy or sell securities. However, a trading account in the minor’s name can be established solely to sell securities held by the minor.
👉 Are KYC norms mandatory for the natural guardian and the minor when opening a Demat or trading account for the minor?
Yes, the guardian and the minor must adhere to the applicable KYC norms while opening a Demat or trading account.
👉 Can a minor’s Demat or trading account continue when they reach adulthood?
Yes, a minor’s Demat or trading account can be continued when the minor ages. Upon adulthood, the former minor must confirm the account’s balance and complete the necessary formalities to continue using the same account.
For more information about opening a Demat account, click here.
